Management Ch 7 Individual and Group Decision Making
Panic
"this is so stressful, i've got to do anything to get rid of the problem" - crisis situations, management is frantic to get ride of problem that he or she cannnot deal with the situation realistically. - judgement may be clouded so you can't deal eith the problem realistically
Credibility
'how believable is the info about the situation?" - eval how much is known about the threat/opp. is the source trustworhy?
Importance
'how high priority is this situation' -determine how much priority to give situation, how extensive will the results be both good and bad
Urgency
'how quickly must I act on the information about the situation?' - is it immediate? what is the window of opportunity? or is it done gradually?
Intutition model
'it just feels right', stems from expertise
evaluation
'law of unintended consequences' things happen that weren't forseen
Relaxed avoidance
'no point in doing anything, nothing bad is going to happen' - management decides to take action in the belief that there will be no great negative consequences, form of complacency (either don't see or disregard the signs of danger or of opportunity)
Defensive avoidance
'there's no reason for me to explore other solution alternatives' -management cannot find good solution and follows by a) Procrastinating b) passing the buck c) deny the risk of any negative consequences - posture of resignation and a denial of responsibility for taking action
Relaxed change
'why not just take the easy way out?" - management realizes the complete inaction will have negative consequences but opts for the first available alternative that involves low risk ~form of satisficing, management avoids exploring variety of alternatives in order to make best decision
Assumptions of the Rational Model
- complete information, no uncertainty - logical, unemotional analysis -best decisions for the organization
questions of the decision tree (4)
-Is the proposed action legal? ( sometimes, need to be reminded that if it isn't legal don't do it) -If, 'Yes', Does the proposed action maximize shareholder value? (profit shareholders, then consider doing it, not always 'yes'. -If 'yes', is the action ethical? (main obligation is to manage 'for the best interests of the corp', which includes the interests of the larger community. -If 'No', would it be ethical NOT to take the proposed action? if action would directly benefit shareholders, might it still be ethical?
to minimize the 'law of unintended consequences' one should:
-give it more time (make sure employees, customers, have enough time to ger used to the new action - change it slightly (tweak, small changes) - try another alternative (if plan A doesn't work, try B or C) - start over (if no alternatives work, go back to drawing board aka stage 1)
two benefits of intution
-speed up decision making, useful when there are deadlines -helpful to management when resources are limited
people can use knowledge of DM styles in three ways:
1. know thyself 2. Influence others 3. Deal with conflicts
Guidelines for intutative awareness
1. open up the closet 2. don't mix up you I's 3. elicit good feedback 4. get a feel for your batting average 5. use imagery 6. play devil's advocate 7. capture and validate your intuition
Challenges to evidence based management
1. too much evidence 2. not enough good evidence 3. evidence doesn't apply 4. people are trying to mislead you 5. you are trying to mislead you 6. side effects outweigh the cure 7. stories are more persuasive
Three attributes among analytical competitors: babson college
1. use of modeling 2. having multiple applicants, not just one 3. support from the top
Disadvantages of Group DM
Few people dominate, groupthink, satisficing, goal displacement
3 effective reactions
Importance, Credibility, Urgency
denfensive avoidance three actions
Procrastination- 'i'll do this later' putting off the decision Pass the Buck-" let Jimmy do it" let someone else take the consequences for making the decision Deny the Risk- 'how bad could it be?" rationalize,
predictive modeling
a data mining technique used to predict future behavior and anticipate the consequences or change
Directive
action oriented, focus on facts, low tolerance for ambiguity, task and tech oriented, efficient, logical, practical, systematic, decisive -tend to be autocratic, excercise power and control, focus on short run
diagnosis
analyzing the underlying causes
princ. 2- No brag, just facts
antidote for over the top assertions about forth coming products, evaluate data before making decisions
curse of knowledge
as knowledge grows, we may be less and less able to see things from an outsiders perspective, hence we are more apt to make irrational decisions
9 biases of DM
availability representation confirmation sunk cost anchoring & adjustment overconfidence hindsight framing escalation of commitmnet
DONT'S for consensus
avoid 'ill support you, if you support me', make agreements to not rock the boat, dont try to achieve concensus by putting questions to a vote (this will only split the group into winners and losers and create bad feelings)
influence others
awarenes of other's styles so you can best increase ability to influence others ex: present data to an analytical person
know thyself
awareness of style helps in identifying your strengths and weaknesses, facilitates potiential for self improvement
Evidence based management
based on best evidence into organization practice, bringing rationality to the decision making process, pfeffer and sutton
Anchoring and adjustment
being influenced by initial figure, it might be irrelvant to market realities
Overconfidence
blind to one's own blindness, people's subjective confidence in thier decision making is greater than their objective accuracry -should not take assertive and confident people at their own eval, unless we have independent reasons to believe they are knowledgible
electric brainstorming
brainwriting, come together over network and generate ideas and alternatives -IDEO 7 rules of brainstorming * benefits- effect choice for finding as many new/ useful ideas to use, but it can waste time in unproductive ones
Analytical
careful, like lots of info and alternative choices. higher tolerance for ambiguity, overanalyze situations, considers more info and alternatives. takes longer, but responds well to new/ uncertain situations
decision
choice made from among available alternatives
Support from the top
company wide embrace of analytics impels change in culture, processes, behavior, and skills for many employees, requires leadership from executives who have passion about quantitative approach
Constraints/ Hindrances to DM
complexity, time/money, cognitive capacity, imperfect info, info overload, dif priorities and conflicting goals
Bounded rationality
concept suggests that the ability of dm to be rational is limited by numerous constraints (complexity, time/money, cognitive capacity, imperfect info, info overload, dif priorities and conflicting goals)
best decisions for the organization
confident of the best future course of action, choose one that best benefits the org.
Delphi Technique
consensus of experts, group process that uses physically dispersed experts who fill out questionnaires to anonymously generate ideas, judgments are combined and averaged to achieve a consensus of expert opinion -originally for technological forecasting, useful when face to face meeting is impractical, or if disagreements might occur, and when high risk of groupthink
Group problem solving techniques
consensus, brainstorming, delphi technique, computer aided DM
Satisficing
cut short meetings, good enough choice, can occur of a group has limited time, lack of info
prospect theory
decision makers find the notion of an actual loss more painful than giving up the possibility of a gain
business intelligence
decision suport system aimed to produce business intelligence by gathering data from a wide range of sources that can be interpreted by humans and support their DM
Computer Aided DM
decision support system- computer based info-system that provides a flexible tool for analysis and helps managers focus on the future
NON rational DM is
descriptive, describe how managers actually make decisions rather than how they should
stage 1- identify the problem/opportunity
determine the actual vs the desirable, face either: problems ( difficulties that inhibit the achievement of goals) or opportunities (situations that present possibilities for exceeding existing goals) *from these try and make improvemenets through diagnosis (analyzing the underlying causes)
drawbacks to intution model
difficult to convince tihers that your hunch makes sense, subject to biases
4 styles of DM1
directive, analytical, conceptual, behavioral
minority dissent
dissent that occurs when a minority in a group publically opposes beliefs, attitudes, ideas, procedures, or policies assumed by the majority of the group -associated with increased innvovation within groups
stage 3- evaluate alternatives and select a solution
ethics, feasibility, and effectiveness, evaluate each on cost and quality but also: is it ethical? is it feasible? is it effective?
princ. 4 - Evidence based management is not just for senior management
everyone, guided by responsibility to gather and act on quantitative and qualitative data and share results with others
princ. 6- If all else fails, slow the spread of bad practice
evidence based misbehavior= ignore orders you know to be wrong or delay their implementation when things are known to be uneffective
bagley suggests: a basic guideline to making good ethical decisions on behalf of the corp is to follow individual ideas on right and wrong
ex: me personally vs as my professional role held at work
value orientation
extent to which a person focusses on either task/ technical concerns or people/ social concerns when making decisions
tolerance for ambiguity
extent to which a person has a high need for structure or control in life
princ. 7- best diagnostic question: what happens when people fail?
failure hurts, but learn from it, face hard facts, use facts to make the system better. failure is a great teacher, forgive and move on but remember them
Representativeness
faulty generalizing from a small sample or single event, just bc something happened once, does not mean it is representative
Escalation of commitment
feely overly invested in a decision, decision makers increase their commitment to a project despite negative info about it, decision once rational has now been supported by irrational reasons
Use of modeling
going beyond simple descriptive stats. use data mining and predictive modeling to identify potential and most profitable customers
intution
going with your gut, making a choice without the use of conscious thought or logical influence
decision tree:
graph of decisions and their possible consequences, used to create a plan to reach a goal, used to aid in making decisions, create by constance bagley
Having multiple applicants, not just one
have multiple applications of analytics supporting many parts of the business
logical, unemotional analysis
having no prejudices or emotional blind spots, you are able to logically evaluate the alternatives, ranking them from best to worst according to personal preferences
princ. 5 - Like everything else, need to sell it
identify the preferred practice based on solid evidence, if unexciting evidence, then use vivid stories to grab management's attention
Brainstorming
increase creativity, technique used to help groups generate multiple ideas and alternatives for solving problems
automated experience
involuntary emotional response to those same matters
Rational model is PRESCRIPTIVE
it describes how managers ought to make decisions - does not describe how they actually do
group DM flaws- when considering making a group decision or not, groups are:
less efficent( take longer to make choice, if time is an issue, pick by yourself) Size affects decision quality (larger the group, the lower quality of the decision, odd number is usually better bc majority rules) May be too confident (liabiltiy may lead to group think, more confident that an individual's choice) Knowledge counts ( DM accuracy is higher when group members know about relevant issues, group leader has ability to weigh member's opinion
deciding to decide
management agrees that he/she must decide what to do about a prob/opp. and take effective DM steps
Rational Decision Making
management should make logical and optimal decisions, model is the 'classical' model, explains how managers will make logical decisions that will be the optimim in futhuring the org's best interests
Imperfect information
managementt have imperfect, fragmentary, information about the alternatives and their consequences
Non Rational Decision Making
managers find it difficult to make optiimal decisions, explains how managers make decision, they assume that dm is nearly always uncertain and risky, making it difficult for managers to make optimal decisions
satisfactory model
managers seek alternatives until they find one that is satisfactory, not optimal - could outweigh any advantages gained from delaying making a decision with all information -choose the first solution that meets criteria, not the best/ optimal choice
Sunk-Cost
money already spent seems to justify continuing, sunk cost fallacy: when managers add up all the money already spent on a project and conclude it is too costly to simply abandon it, 'concode effect'
Behavioral
most people oriented, work well with others, enjoy soical interactions, supportive, receptive to suggestions, show warmth, prefer verbal over written info - tend to avoid conflict, concerned with others, wishy-washy approach, hard time saying no
complete information, no uncertainty
obtain complere, error free info about all alternative courses of action and the consequences that would follow
stage 2- think up alternative solutions
obvious and creative alternative solutions from thinking and innovating
Groupthink
occurs when group members strive to agree for the sake of unamity and avoid accurating assessing the decision situation, positive team spirit works against sound judgement
Consensus
occurs when members are able to express their opinions and reach agreement to support the final decision -everyone agrees to support the final outcome, does not mean they have to support how but work together towards it's success
Goal displacement
occurs when primary goal is sunsumed by a secondary goal
expectations about happiness
often right to describe what outcome, but unable to describe how strongly they will feel and for how long
Conflicting goals
other managers, colleagues have conflciting goals
Different cognitive capacity, values, skills, habits, unconsciencous reflexes
people arent built the same way, all people have personal limitations and biases that affect their judgement
Holistic hunch (expertise)
person's explicit and tacit knowledge about a person, situation, object, or decision opportunity
Complexity
problems that needs solving are often exceedingly complex, beyond understanding
big data analytics
process of examining large amounts of data of a variety of types to uncover hidden patterns, unknown correlations, and other useful info. -can solve large scale problems and specific ones in practical use
decision making
process of identifying and choosing alternative courses of action
decision making stye
reflects the combination of how an individual precieves and repsonds to info -styles vary by value orientation and tolerance for ambiguity
4 ineffective reactions
relaxed avoidance, relaxed change, defensive avoidance, panic
Conceptual
rely on intuition and long term perspective, high tol. for ambiguity, focus on people/ social aspects, broad perspective to problem solving, considers many and future options, dicuss with others to get info, willing to take risks, creative solutions - tend to be indecisive
Satisficing model
satisfactory is good enough, management cant act truly logical bc their rationality was bounded by many resisitrictions
Pfeffer and sutton
say that: fail to face hard facts and use best evidence to navigate competitive environment, routinely trumps the competition
princ. 3- See yourself and your Org. as outsiders do
see from other's views instead of 'rampant optimism' (inflated views of own talents)
Confirmation
seeking info to support one's point of view, and discount data that does not
Framing
shaping how a problem is presented, tendency of decision makers to be influenced by the way a situation/ prob is presented to them, how the problem is presented to people may influence us to consider a certain solution simply bc that was how it was framed
Different Priorities
some data are considered more importantm so certain facts get ignored
ethics officer
someone trained about the matters or ethics in the workplace, particularly in solving ethical dilemmas -creates value statements to guide employees
analytics
sophisticated forms of business data analysis purest application of evidence-based management ex: portfolio analysis (investment advisor evals the risks of dif stocks), time series forecasts (predicts future based on past)
4 stages of Rational Decision Making
stage 1- identify the problem/opportunity stage 2- think up alternative solutions stage 3- evaluate alternatives and select a solution stage 4- implement and evaluate the solution chosen
Big Data
stores ofdata so vast that convenital data base management systems cannot handle them so super level hardware is required. -includes not only data in corporate dbs but also web-browsing trails, soical netwoek communications, sensor data and surveillance data
stage 4- implement and evaluate the solution chosen
successful impletemation includes planning carefully, and be sensitive to those affected
two systems of decision making by daniel kahneman
system 1- intuitive, largely unconscious, operates automatically, quickly, fast, intuitive unconscious mode ex: detect hostility in voice system 2- analytical and conscious, slow deliberate effort of reasoning, draws and arrives ar explicit beliefs and reasoned choices ex: filling out fax forms, parking car in tight spot
deal with conflict
take same knowledge but use different systems to arrive at four different decisions, interpersonal conflicts at work
Hindsight
the I knew it all along effect, tendency of people to view events as being more predictible than they really are, when look back on decision and try to recconstruct why they decided on something
Advantages to Group DM
the group must be diverse -------------------- -greater pool of knowledge( more info to draw from) - different perspectives ( see probs from dif angles) - intellectual stimulation (bigger brainstorming, creativity) - better understanfing of decision rationale ( apt to understand reasoning and the 'why' behind the choice made, pros/cons) - deeper commitment to the decision (more apt to being committed to see action successfully impletemented and completed
Time and Money
there is not enough time or money to gather all relevant info
princ. 1- Treat your Org. as an unfinished prototype
think as if org. is unfinished and wont be ruined by dangerous new ideas or impossible to change bc of employee/ management's resistence
few people dominate and intimidate
those that talk louder, longer or strong leader is disproportion the influence
7 impletmentation principles
to help companies that are committed to doing what it takes to profit from evidence-based management
Information Overload
too much info for one person to process
DO's for consensus
use active listening, involve as many members as possible, seek reasons behind arguement and dig for facts
Availability
using only the info available, managers use info readily available from memory to make judgements, may not be present to complete a situation
Group DM benefits
when it can : increase quality increase acceptance increse development